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The potential of an Asian carbon market

The potential of an Asian carbon market
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Written by Michael Wang
  • Apr 01, 2026
  • 4 min read

Carbon pricing is gaining ground across Asia, with China operating the world's largest emissions-trading system and countries from Japan to Indonesia developing their own schemes. Whether these fragmented efforts can coalesce into a regional market remains an open question—but the economic and climate stakes, for Asia and the world, are enormous.

Qian Zhimin, the former chairman of State Power Investment Corporation (SPIC), one of China's largest power companies, recently made the case for building an Asian carbon market. When SPIC was formed about a decade ago, clean energy was roughly 40% of its installed capacity. By the end of 2025, that figure had reached 74%—a fossil-fuel giant that had transformed itself into a clean-energy leader.
Mr Qian said the European Union (EU) carbon market traded some EUR 535 billion ($615 billion) last year. He argued that if Asia built a comparable market, it could theoretically be worth EUR 4.3 trillion ($4.9 trillion), or more than eight times larger.

That comparison requires a large asterisk. It assumes Asia matches European carbon prices. Asian carbon prices cannot realistically converge with European ones any time soon. That would be too costly for developing economies in this region that still need to prioritise industrialisation, infrastructure, and raising living standards.

But the idea does not require price convergence to be powerful.

The scale of Asia's carbon emissions, if paired with a carbon price of between EUR 10 and EUR 20 ($11.50–$23) a tonne—well below the roughly EUR 70 ($80.50) a tonne in the EU—means an active Asian carbon market could still exceed Europe's in size.

The building blocks for a potential Asian carbon market are already materialising.

China's national emissions-trading system, already the world's largest by emissions covered, has expanded from covering just the power sector to include steel, cement, and aluminium smelting. By the late 2020s, its coverage could reach 8.7 billion–10.6 billion tonnes of emissions, with a potential market size of $56 billion–$84 billion by 2030, according to a report by Bain and the World Economic Forum. Japan is transitioning its GX-ETS from a voluntary to a mandatory emissions-trading system in April, and its Joint Crediting Mechanism now spans 31 partner countries.

Singapore has raised its carbon tax to SGD 45 ($31) per tonne in 2026, and has signed Article 6 implementation agreements with ten countries—from Thailand to Rwanda—as part of its push to become a regional carbon-services and trading hub. Under Article 6 of the Paris Agreement, countries can collaborate on cutting emissions: in simple terms, Singapore can help fund emissions-reducing projects overseas and count part of those reductions towards its own climate targets, provided both sides ensure the same carbon cuts are not counted twice.

Indonesia, Vietnam, Malaysia, and Thailand are each developing compliance carbon-pricing systems at different stages: Indonesia already operates an ETS, Vietnam is piloting one, Thailand is planning one, and Malaysia is studying a future ETS. Meanwhile, the ASEAN Common Carbon Framework is being developed by carbon-market associations from Malaysia, Indonesia, Singapore, and Thailand, together with the ASEAN Alliance of Carbon Markets, with the aim of aligning standards and principles for more interoperable carbon markets across the region.

Piece by piece, across Asia, aspirational plans are being transformed into definitive action.

China has built the world's largest and fastest-growing clean-energy system, but the rest of developing Asia—understandably constrained by fiscal realities and competing development priorities—still has some way to go. A functioning Asian carbon market could provide an engine that depends less on government budgets or foreign aid to invest in clean technologies and lower emissions: the market itself generates the investment signal. Asia produces more than half of the world's greenhouse-gas emissions and drives around 55% of global GDP, according to the World Economic Forum. Yet regional carbon markets currently cover only a fraction of Asia's emissions.

An Asian carbon market could also represent a new kind of multilateral economic architecture for the region—one built not around traditional trade blocs or security alliances, but around the shared challenge of decarbonisation. It could provide a market-driven mechanism for climate finance in a region where the estimated funding gap runs into hundreds of billions of dollars annually. It could give developing Asian economies a way to monetise their natural assets—from forests to mangroves—without depending on aid frameworks led by developed economies. And it could create the kind of cross-border economic interdependence that, historically, has tended to reduce geopolitical friction rather than increase it.

The era of carbon pricing in Asia may be just beginning. But Asia, whether it realises it or not, is sitting on the largest untapped carbon market in the world.